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Hutchinson Technology Reports Third Quarter Net Loss(PrimeNewswire Via Acquire Media NewsEdge) HUTCHINSON, Minn., July 29, 2008 (PRIME NEWSWIRE) -- Hutchinson Technology Incorporated (Nasdaq:HTCH) today reported net sales of $150.4 million for its fiscal third quarter ended June 29, 2008, up 5 percent compared with $143.8 million in the preceding quarter. In the fiscal 2007 third quarter, net sales totaled $156.7 million. The company reported a net loss of $8.4 million, or $0.36 per share, for the fiscal 2008 third quarter. The net loss included a $10.2 million reduction in gross profit as a result of preparing for and initiating TSA+ volume production, a $5.6 million operating loss in the company's BioMeasurement Division and pre-tax charges of approximately $1.1 million, or $0.03 per share, for severance costs. In the comparable fiscal 2007 period, the company reported a net loss of $13.5 million, or $0.52 per share. The net loss for the fiscal 2007 third quarter included pre-tax charges of approximately $8.7 million, or $0.22 per share, for severance costs and the write-off of design costs for a cancelled facility expansion. The company shipped approximately 189 million suspension assemblies in its fiscal 2008 third quarter, compared with approximately 179 million in the preceding quarter and approximately 190 million in the fiscal 2007 third quarter. Overall average selling price in the fiscal 2008 third quarter was $0.79 compared with $0.80 in both the preceding and prior year quarters. Gross margin in the fiscal 2008 third quarter was 11 percent, compared with 13 percent in both the preceding quarter and last year's third quarter. The company's total cash and investments decreased from $285 million at the end of the fiscal 2008 second quarter to $275 million at the end of the third quarter primarily as a result of the company's repurchase of approximately $10 million of its common shares. Disk Drive Components Division Kathleen Skarvan, president of the company's Disk Drive Components Division, said the company increased its overall suspension assembly market share, primarily due to gains in the 2.5-inch mobile segment. "Our shipments for 2.5-inch mobile applications increased 34 percent compared to the preceding quarter and 76 percent compared to last year's third quarter," said Skarvan. In addition, we stabilized our share position in the 3.5-inch ATA segment after several periods of decline, and we maintained our market-leading position in the enterprise segment." Skarvan added that the company successfully initiated volume production and shipments of TSA+ suspension assemblies in the fiscal 2008 third quarter as planned. "We shipped more than one million TSA+ suspension assemblies during the third quarter, and we currently expect fourth quarter TSA+ shipments to increase roughly five-fold from the third quarter level," said Skarvan. "In addition, we are working with all of the hard disk drive manufacturers to develop TSA+ suspension assemblies for their future disk drive programs." Skarvan said that although the initiation of TSA+ volume production has dampened the company's gross margin, this burden should diminish with the TSA+ volume growth and process and productivity improvements that are expected over the next several quarters. BioMeasurement Division The company's BioMeasurement Division added nine hospitals as customers for its InSpectra(r) StO(2) Tissue Oxygenation Monitor during the fiscal 2008 third quarter, bringing the total number of customers to 45 and year-to-date net sales to $598,000. The number of prospective customers currently evaluating or moving towards purchase of the InSpectra StO(2) System totaled 115 at the end of the third quarter, compared with 106 at the end of the preceding quarter. Rick Penn, president of the BioMeasurement Division, noted that several hospitals have now formalized guidelines for use of the system. "This is key to establishing routine use of the system and advancing StO(2) monitoring as a standard of care," said Penn. Penn added that a growing body of clinical and economic evidence attesting to the value of StO(2) monitoring has been documented in numerous studies. "This compelling evidence is supporting our efforts to increase adoption of InSpectra StO(2) monitoring in trauma hospitals and is encouraging evaluation in a number of other clinical applications, including emergency medicine, surgery and intensive care. In addition, there are several studies underway to further demonstrate how StO(2) can be used to improve treatments and outcomes," said Penn. Abstracts of published studies regarding clinical applications of StO(2) monitoring can be found at www.htibiomeasurement.com. Business Outlook Commenting on the company's third quarter performance, Wayne M. Fortun, Hutchinson Technology's president and chief executive officer, said the market share gains in the Disk Drive Components Division resulted from the company's continued emphasis on cost reductions, quality improvement and excellent customer service. "Our focus in these areas, combined with our technology leadership, should enable us to continue winning preferred supplier positions on customers' new disk drive programs. We believe we can sustain or improve upon this quarter's market share gains," said Fortun. Storage industry analysts now expect calendar year 2008 disk drive unit shipments to grow by 13 to 14 percent. Based on its current expectations regarding fourth quarter suspension assembly shipments and estimated fourth quarter average selling prices of $0.76 to $0.77, Fortun said the company now estimates that fiscal 2008 net sales will total $630 to $640 million. Regarding the BioMeasurement Division, Fortun said the growing number of hospitals implementing specific guidelines for use of the InSpectra StO(2) System and the expanding interest in the system for applications beyond trauma are evidence of increasing momentum in the division. The company expects BioMeasurement Division revenue for fiscal 2008 to reach approximately $1 million. Hutchinson Technology to Host Conference Call The company will conduct a conference call and webcast for investors beginning at 4:00 p.m. Central Time (CT) on July 29, 2008. Individual investors and news media may participate in the conference call via the live webcast. The webcast will be available through the Investor Relations page on Hutchinson Technology's web site at www.htch.com. Webcast participants will need to complete a brief registration form and should allot extra time before the webcast begins to register and, if necessary, download and install audio software. About Hutchinson Technology Hutchinson Technology is a global technology leader committed to creating value by developing solutions to critical customer problems. The company's Disk Drive Components Division is the leading worldwide supplier of suspension assemblies for disk drives. The company's BioMeasurement Division is focused on bringing to the market new technologies and products that provide information clinicians can use to improve the quality of health care. Cautionary Note Regarding Forward-Looking Statements This announcement contains forward-looking statements regarding demand for and shipments of the company's products, disk drive shipments, production capability, selling prices, investments in research and development, product development, product commercialization and adoption, leverage of our investments, operating performance, results of operations and financial results. The company does not undertake to update its forward-looking statements. These statements involve risks and uncertainties. The company's actual results could differ materially from those anticipated in these forward-looking statements as a result of changes in market demand and market consumption of disk drives or suspension assemblies, market acceptance of new products, the company's ability to produce suspension assemblies at levels of precision, quality, volume and cost its customers require, changes in product mix and selling prices, changes in customers yields, changes in storage capacity requirements, changes in expected data density and other factors described from time to time in the company's reports filed with the Securities and Exchange Commission. Hutchinson Technology Incorporated (Nasdaq: HTCH) Third Quarter Ended ------------------- June 29, 2008 June 24, 2007 -------------- -------------- Net sales $ 150,398,000 $ 156,686,000 Gross profit $ 16,512,000 $ 20,979,000 Severance and other costs $ 1,061,000 $ 8,728,000 Loss from operations $ (12,037,000) $ (21,369,000) Net loss $ (8,385,000) $ (13,480,000) Net loss per common share: Basic $ (0.36) $ (0.52) Diluted $ (0.36) $ (0.52) Weighted average common and common equivalent shares outstanding: Basic 23,212,000 26,027,000 Diluted 23,212,000 26,027,000 Thirty-Nine Weeks Ended ----------------------- June 29, 2008 June 24, 2007 -------------- -------------- Net sales $ 467,319,000 $ 516,249,000 Gross profit $ 68,370,000 $ 86,550,000 Severance and other costs $ 1,061,000 $ 8,728,000 Loss from operations $ (20,142,000) $ (24,635,000) Net loss $ (12,332,000) $ (11,313,000) Net loss per common share: Basic $ (0.50) $ (0.44) Diluted $ (0.50) $ (0.44) Weighted average common and common equivalent shares outstanding: Basic 24,902,000 25,961,000 Diluted 24,902,000 25,961,000 At June 29, 2008 At Sept. 30, 2007 ---------------- ----------------- Total assets $ 991,391,000 $1,049,989,000 Cash and cash equivalents $ 34,044,000 $ 64,509,000 Short-term investments $ 146,314,000 $ 233,043,000 Long-term investments $ 94,770,000 $ -- Total shareholders' investment $ 535,380,000 $ 599,547,000 Hutchinson Technology Incorporated Condensed Consolidated Statements of Operations - Unaudited (In thousands, except per share data) Thirteen Weeks Ended Thirty-Nine Weeks Ended -------------------- ----------------------- June 29, June 24, June 29, June 24, 2008 2007 2008 2007 -------- -------- -------- -------- Net sales $150,398 $156,686 $467,319 $516,249 Cost of sales 133,886 135,707 398,949 429,699 -------- -------- -------- -------- Gross profit 16,512 20,979 68,370 86,550 Research and development expenses 9,697 14,524 30,367 44,830 Selling, general and administrative expenses 17,791 19,096 54,590 57,627 Severance and other expenses 1,061 8,728 1,061 8,728 Litigation charge -- -- 2,494 -- -------- -------- -------- -------- Loss from operations (12,037) (21,369) (20,142) (24,635) Interest expense (2,906) (2,606) (8,778) (7,452) Interest Income 1,390 3,748 9,305 11,316 Other income, net 526 648 1,855 3,418 -------- -------- -------- -------- Loss before income taxes (13,027) (19,579) (17,760) (17,353) Benefit for income taxes (4,642) (6,099) (5,428) (6,040) -------- -------- -------- -------- Net loss $ (8,385) $(13,480) $(12,332) $(11,313) ======== ======== ======== ======== Basic loss per share $ (0.36) $ (0.52) $ (0.50) $ (0.44) ======== ======== ======== ======== Diluted loss per share $ (0.36) $ (0.52) $ (0.50) $ (0.44) ======== ======== ======== ======== Weighted-average common shares outstanding 23,212 26,027 24,902 25,961 ======== ======== ======== ======== Weighted-average common and diluted shares outstanding 23,212 26,027 24,902 25,961 ======== ======== ======== ======== Hutchinson Technology Incorporated Condensed Consolidated Balance Sheets - Unaudited (In thousands, except shares data) June 29, September 30, ASSETS 2008 2007 --------- ------------- Current assets: Cash and cash equivalents $ 34,044 $ 64,509 Short-term investments 146,314 233,043 Trade receivables, net 87,023 101,997 Other receivables 7,727 20,529 Inventories 78,915 61,183 Deferred tax assets 9,564 8,582 Other current assets 7,946 7,444 --------- ----------- Total current assets 371,533 497,287 Long-term investments 94,770 -- Property, plant and equipment, net 429,815 457,883 Deferred tax assets 84,156 79,008 Other assets 11,117 15,811 --------- ----------- $ 991,391 $ 1,049,989 ========= =========== LIABILITIES AND SHAREHOLDERS' INVESTMENT Current liabilities: Current maturities of long-term debt $ 1,418 $ 1,344 Accounts payable 29,223 29,528 Accrued expenses 17,606 16,535 Accrued compensation 22,223 21,257 --------- ----------- Total current liabilities 70,470 68,664 Long-term debt, less current maturities 2,869 3,944 Convertible subordinated notes 375,000 375,000 Uncertain tax positions 6,190 -- Other long-term liabilities 1,482 2,834 Shareholders' investment: Common stock $.01 par value, 100,000,000 shares authorized, 22,890,000 and 26,074,000 issued and outstanding 229 261 Additional paid-in capital 370,412 411,349 Accumulated other comprehensive (loss) gain (6,554) 29 Accumulated earnings 171,293 187,908 --------- ----------- Total shareholders' investment 535,380 599,547 --------- ----------- $ 991,391 $ 1,049,989 ========= =========== Hutchinson Technology Incorporated Condensed Consolidated Statements of Cash Flows - Unaudited (Dollars in thousands) Thirty-Nine Weeks Ended -------------------------- June 29, June 24, 2008 2007 ---------- ---------- Operating activities: Net loss $ (12,332) $ (11,313) Adjustments to reconcile net loss to cash provided by operating activities: Depreciation and amortization 83,814 85,596 Stock-based compensation 4,541 3,461 Benefit for deferred taxes (6,147) (8,724) Loss on disposal of assets 670 2 Severance and other expenses -- 8,728 Litigation charge 2,494 -- Changes in operating assets and liabilities 15,157 3,935 --------- --------- Cash provided by operating activities 88,197 81,685 --------- --------- Investing activities: Capital expenditures (53,838) (87,026) Purchases of marketable securities (852,866) (1,333,665) Sales/maturities of marketable securities 838,836 1,322,253 --------- --------- Cash used for investing activities (67,868) (98,438) --------- --------- Financing activities: Repayment of long-term debt (1,001) (932) Repurchase of common stock (57,721) -- Net proceeds from issuance of common stock 7,928 6,955 --------- --------- Cash (used for) provided by financing activities (50,794) 6,023 --------- --------- Net decrease in cash and cash equivalents (30,465) (10,730) Cash and cash equivalents at beginning of period 64,509 40,331 --------- --------- Cash and cash equivalents at end of period $ 34,044 $ 29,601 ========= ========= Hutchinson Technology Incorporated Earnings Per Share Calculation - Unaudited (In thousands, except per share data) Thirteen Thirty-Nine Weeks Ended Weeks Ended ------------------- -------------------- June 29, June 24, June 29, June 24, 2008 2007 2008 2007 ------- --------- --------- --------- Net loss (A) $(8,385) $(13,480) $(12,332) $(11,313) Plus: interest expense on convertible subordinated notes -- -- -- -- Less: additional profit sharing expense and income tax provision -- -- -- -- ------- -------- -------- -------- Net loss available to common shareholders (B) $(8,385) $(13,480) $(12,332) $(11,313) ======= ======== ======== ======== Weighted average common shares outstanding (C) 23,212 26,027 24,902 25,961 Dilutive potential common shares -- -- -- -- ------- -------- -------- -------- Weighted average common and diluted shares outstanding (D) 23,212 26,027 24,902 25,961 ======= ======== ======== ======== Basic loss per share (A)/(C) $ (0.36) $ (0.52) $ (0.50) $ (0.44) Diluted loss per share (B)/(D) $ (0.36) $ (0.52) $ (0.50) $ (0.44) CONTACT: Hutchinson Technology Inc. INVESTOR CONTACT: Chuck Ives, Investor Relations Manager 320-587-1605 MEDIA CONTACT: Connie Pautz, Corporate Communications Director 320-587-1823 Copyright ? 2008 PrimeNewswire, Inc. |